Here's why Zynga shares closed up more than 40% on Monday
Take-Two Interactive to buy Zynga Inc for $12.70 billion in cash and stock.
Khan is a professional trader and business writer with over 7 years of experience in several financial markets. Khan takes pride in sharing insightful articles with his readers that help them improve their investment portfolios.
2022-01-10 18:57

The latest blockbuster buzz in the gaming industry came from Take-Two Interactive Software Inc on Monday as it publicly announced its decision to buy mobile gaming company Zynga Inc. Take-Two Interactive is buying Zynga Inc for $12.7 billion in cash and stock that translates to $9.84 per share or a 64% premium on where Zynga closed on Friday. According to Take-Two, shareholders of Zynga will receive $3.50 in cash and $6.36 in Take-Two stock for each share of Zynga they held. The deal is yet to secure regulatory and shareholder approval and will likely close by June 30th.
CEO Zelnick’s remarks

In the press release, Strauss Zelnick, the CEO of Take-Two Interactive, said:

This strategic combination brings together our best-in-class console and PC franchises, with a market-leading, diversified mobile publishing platform that has a rich history of innovation and creativity.

Zynga’s best-known hit has been the FarmVille series. The company also once achieved the title of the most successful app developer on Facebook. In the following years, Zynga turned to mobile gaming in hopes of conquering that market as well. Even though the company was a big provider of entertainment during the downtime of Covid-19, its stock tanked by about 38% in 2021. But with the announcement of the new deal with Take-Two, the company’s shares skyrocketed nearly 49% on Monday. According to Wedbush Securities’ Michael Pachter, the agreement between the two companies was a “solid move”. He, however, has a price target of $15 on Zynga that is much higher than what Take-Two has offered. In his interview with CNBC, he said:

Take-Two should see an acceleration of its mobile business, including taking existing brands and turning them into the mobile franchise.

Take-Two has identified synergies

Take-Two Interactive expects a minimum of $500 million in annual revenue synergies upon completing the transaction. Excluding that, the combined firm is still expected to see annual revenue growth of about 14% over the next three years. Take-Two has produced many big hits in the PC and console gaming market, including games like Grand Theft Auto, Hades, and NBA 2K. Now the company is hoping to branch out into the mobile gaming market, which makes up more than half the entire video game industry.

Mobile gaming accounted for 12% of Take-Two’s net bookings in fiscal 2022, however, the company is aiming for an increase in the number and expects mobile gaming to make up half of its net bookings in the next fiscal year. The news was not as well-received by shareholders of Take-Two as reflected in the stock that closed down more than 10% on Monday.

Disclaimer: I have no positions in any of the stocks mentioned. I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. All information should be independently verified and should not be relied upon for purposes of transacting securities or other investments. See terms for more info.

Published On
2022-01-10 18:57

About the Author
Khan is a professional trader and business writer with over 7 years of experience in several financial markets. Khan takes pride in sharing insightful articles with his readers that help them improve their investment portfolios.

Nio Smashes Delivery Records and is Poised to Rebound
Nio reported its December, fourth quarter, and full-year delivery figures over the weekend, and suffice to say, Wall Street was impressed.
By Mike Sakuraba | 1 week ago

Tilray; capturing the cannabis market with another acquisition
With the acquisition of Breckenridge Distillery, Tilray is undergoing a horizontal expansion to increase its offering in the beverage alcohol sector.
By Precious Njoku | 2 weeks ago

Why You Should Buy the Tesla Shares that Elon Sold
As much as analysts say that Tesla’s stock is inflated and that the EV market is catching up to the company, we cannot deny that the stock is resilient.
By Mike Sakuraba | 2 weeks ago

Why Tesla Rebounded but Lucid, RIvian, and Nio did not
Now that Musk is finished for this year, investors seemed to take that as a bullish sign.
By Mike Sakuraba | 3 weeks ago

Why I Was Wrong About AliBaba
AliBaba’s business and stock are heading in opposite directions, but one day soon we will find a capitulation.
By Mike Sakuraba | 3 weeks ago

Why Nio is in Freefall: Is it time to sell Nio?
Nio investors are no doubt feeling some deja vu after the stock tumbled into the low single digits in the winter of 2019.
By Mike Sakuraba | 4 weeks ago

Breaking into the Cannabis industry with strength
The company recently announced annual revenue of $2.9 billion, with an adjusted earning per share of $12.46.
By Precious Njoku | 4 weeks ago